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Liquidity in Frictional Asset Markets

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  • GUILLAUME ROCHETEAU
  • PIERRE‐OLIVIER WEILL

Abstract

On November 14-15, 2008, the Federal Reserve Bank of Cleveland hosted a conference on “Liquidity in Frictional Asset Markets.” In this paper we review the literature on asset markets with trading frictions in both finance and monetary theory using a simple search-theoretic model, and we discuss the papers presented at the conference in the context of this literature. We will show the diversity of topics covered in this literature, e.g., the dynamics of housing and credit markets, the functioning of payment systems, optimal monetary policy and the cost of inflation, the role of banks, the effect of informational frictions on asset trading.
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Suggested Citation

  • Guillaume Rocheteau & Pierre‐Olivier Weill, 2011. "Liquidity in Frictional Asset Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 261-282, October.
  • Handle: RePEc:mcb:jmoncb:v:43:y:2011:i::p:261-282
    DOI: j.1538-4616.2011.00435.x
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    Cited by:

    1. Paolo Dai Pra & Fulvio Fontini & Elena Sartori & Marco Tolotti, 2011. "Endogenous equilibria in liquid markets with frictions and boundedly rational agents," Working Papers 7, Department of Management, Università Ca' Foscari Venezia.
    2. Cui, Wei, 2016. "Monetary–fiscal interactions with endogenous liquidity frictions," European Economic Review, Elsevier, vol. 87(C), pages 1-25.
    3. repec:bof:bofrdp:urn:nbn:fi:bof-201510061415 is not listed on IDEAS
    4. repec:eee:dyncon:v:79:y:2017:i:c:p:184-200 is not listed on IDEAS
    5. Huber, Samuel & Kim, Jaehong, 2017. "On the optimal quantity of liquid bonds," Journal of Economic Dynamics and Control, Elsevier, vol. 79(C), pages 184-200.
    6. Kronick, Jeremy, 2015. "Do Loan-to-Value Ratio Regulation Changes Affect Canadian Mortgage Credit?," MPRA Paper 73671, University Library of Munich, Germany.
    7. repec:bla:manchs:v:85:y:2017:i:3:p:357-393 is not listed on IDEAS
    8. Selcuk, Cemil, 2012. "Distressed sales and liquidity in OTC markets," MPRA Paper 38188, University Library of Munich, Germany.
    9. Benjamin Lester & Guillaume Rocheteau & Pierre‐Olivier Weill, 2015. "Competing for Order Flow in OTC Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S2), pages 77-126, June.
    10. Yuan Yuan, 2014. "Funding Liquidity and Market Liquidity," DETU Working Papers 1406, Department of Economics, Temple University.
    11. Eerola, Essi & Määttänen, Niku, 2015. "Matching and credit frictions in the housing market," Research Discussion Papers 20/2015, Bank of Finland.
    12. Ederington, Louis & Guan, Wei & Yadav, Pradeep K., 2015. "Dealer spreads in the corporate bond market: Agent vs. market-making roles," CFR Working Papers 15-11, University of Cologne, Centre for Financial Research (CFR).

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